When Using the Direct Method, How Are Salaries Paid to Employees

question 110

Multiple Choice

When using the direct method, how are salaries paid to employees reported on the statement of cash flows?

• A) Operating activity
• B) Investing activity
• C) Financing activity
• D) Noncash investing and financing activity

---

Definitions:

Discount Rate

The interest rate used to discount future cash flows to their present value, often used in capital budgeting and investment planning.

Lease Payments

Regular payments made by a lessee to a lessor for the use of an asset for a specific period of time.

Profitability Index

A financial ratio that measures the return on investment for a project by dividing the present value of future cash flows by the initial investment.

Invested Sum

The total amount of money allocated towards an investment or project.